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5 Key Facts About Patent Reform Act

Congress just passed the most sweeping patent reform in generations. Here's how it will affect inventors, tech companies, and the government itself.

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After years of hand-wringing about patent reform, the Senate approved major changes to America's patent laws Thursday with an 89-9 vote passing the America Invents Act. That sets the stage for President Obama to sign the patent overhaul into law just days after the Patent Office issued its 8 millionth patent.

Here are five key pieces included in and missing from the overhaul, and what they mean for inventors, entrepreneurs, established tech companies, and the U.S. Patent and Trademark Office itself:

First to File: The patent system of today is a first-to-invent system, meaning that whoever aims to prove to a court that they invented something first can easily force another party into a protracted legal battle. However, the first-to-file system put into place by the America Invents Act would make things much clearer. In its most general terms, if you filed for the patent first, you get the protection. While the new rule is more clear-cut, some small businesses and entrepreneurs say it favors big businesses that have the money and lawyers to quickly file for patents, and have pointed to lobbying on behalf of major tech companies as evidence of this.

Post-Grant Review: There is a current procedure for re-examination of a patent by the Patent Office after it's already been issued, but it's limited in scope. The America Invents Act creates a new process by which to challenge a patent within nine months of its issuance by presenting evidence directly to the Patent and Trademark Office itself, which will review the merits of the argument. This could help some eliminate in-court fights, but it could also be just another avenue of attack that must be handled by an under-equipped Patent Office.

Fee Collection Overhaul: Congress currently sets the fees the Patent Office collects, and controls its budget. Under the America Invents Act, however, the Patent Office will be able to set its own fees. Congress will continue to have some budgetary power, but fees collected above the Patent Office's budget will be placed into escrow, and the Patent Office can petition for their release. Fees will go up for some filers, but small entities will likely see fee reductions under a new provision.

In terms of appropriations, the hope is that this will give a bigger budget and increased freedom of action to the Patent Office. But in recent years, Congress has siphoned money away from the Patent Office, taking its fees and using them for other things, leaving few funds for much needed IT and process overhauls. The Senate narrowly defeated an amendment that would completely remove the Patent Office from the appropriations process and let the Patent Office keep all the fees it collects.

Lack of Patent Lawsuit Reform: Although it was suggested and included in some earlier iterations of the bill, there's no new process for determining damages included in the America Invents Act. That means jury awards for patent violations may continue to be huge for the foreseeable future. The proposed system would have calculated damages based on the revenue that could earned based on the patent if it hadn't been infringed.

Software and "Business Method" Changes: There has been much debate in recent years in the software community about the propriety of software patents, and the America Invents Act does little to clear that up, except in a few minor niches. One provision, for example, specifically excludes tax preparation software from a rule prohibiting the patenting of tax strategies, and another creates a way to defeat patents related to financial products, with the aim of quashing a certain group of patents for check-imaging software.

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User Rank: Apprentice
1/12/2012 | 5:13:16 PM
re: 5 Key Facts About Patent Reform Act
Let me see if I understand this "first to file" change. With the new legislation, what happens if company ABCD invents a product "Little Gadget" and they file for a patent on "Little Gadget" with their single, busy attorney and bring their product to market with "patent pending" on it and company XYZ notices "Little Gadget" doesn't have a patent and the paperwork hasn't been filed with the patent office yet, then has their team of dedicated IP attorneys file for a patent on "Little Gadget" first? With the previous legislation it was pretty clear that company ABCD would be awarded the patent, but with the new legislation it seems like company XYZ will win the patent and company ABCD will be wide open for litigation.

I don't see how this reform bill helps American inventors. Instead it seems to help the patent trolls. Maybe I'm missing something.
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